House approves corporate-tax breaks

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The House of Representatives yesterday passed a bill that would create about $155 billion in new corporate-tax breaks and add $34 billion to the deficit.

Lawmakers voted 251-178 in favor of legislation that also would roll back the export subsidy that the World Trade Organization (WTO) said is illegal.

The WTO ruling allowed the European Union to throw up barriers on $4 billion in U.S. exports, retaliation that began -- at a much lower level -- in March. Sanctions stand at 8 percent on more than 1,000 U.S. products and increase one percentage point each month.

The House bill still has to be reconciled with the Senate version, a nearly $170 billion corporate-tax package that, because it offsets new cuts by closing old loopholes, is supposed to add nothing to the deficit. The House version only offsets some of its costs by closing loopholes and stepping up tax collection.

The two bills share the same core features by eliminating the illegal export subsidy and lowering corporate taxes for domestic manufacturers, farmers and small businesses to 32 percent from 35 percent, and effectively lowering taxes for multinational corporations.

But they diverge on key provisions, including their bottom lines, Senate guarantees for overtime pay and $19 billion in incentives for energy production, and a House program worth nearly $10 billion to buy out tobacco growers.

The tobacco provision, which ends a subsidy program in return for the buyout, has stirred debate -- winning some votes from Democrats in districts where tobacco is grown, but alienating others worried about the cost.

"The numerous special-interest provisions made this a questionable bill at best, but the addition of the tobacco buyout provision was the straw that broke Joe Camel's back," said Rep. Jeff Flake, Arizona Republican.

Rep. Bill Thomas, California Republican and bill sponsor, said the legislation would meet the immediate goal of ending EU sanctions, while also lowering taxes for a host of firms.

The additional provisions were needed to help build momentum for passage, he said.

"I look forward to quickly resolving differences between the House and Senate versions and sending a bill to the president's desk for his signature so American businesses can continue to do what they do best -- create jobs," Mr. Thomas said.

Much of corporate America lauded the bill.

"This bill bolsters our growing economy by making it easier and more affordable for American businesses to reinvest and create jobs here," said Bruce Josten, U.S. Chamber of Commerce executive vice president.

Critics likened the bill to a Christmas tree, with an ornament for almost every corporate interest represented in Washington.

"You can put lipstick on a pig, but you can't call it a lady. This is a lousy bill, and it has nothing to do with reform," said Rep. Charles B. Rangel, New York Democrat.

The bill includes an array of narrowly focused provisions, including tax breaks for tackle boxes, bows and arrows, gifts to whaling tribes and rules for private firms to execute IRS collection duties.

The IRS provision worried some lawmakers. It is meant to raise revenue, but also allows debt-collection agencies to keep a percentage of the revenue they collect from taxpayers.